Vision For Healthcare Futures Market

Augmenting the USA Health Insurance Market

Universal Healthcare

Supporters of Universal Healthcare understand it as the best solution to provide basic healthcare to the entirety of the population. Universal Healthcare is a great idea. It requires the political commitment of the nation as a whole -- a condition that has not been forthcoming in the United States and doesn't appear forthcoming anytime soon. This approach herein is not to replace the goal of Universal Healthcare, nor is it to replace the current private healthcare system, but to provide a means that would work in the present-day United States to provide more distribution of healthcare and healthcare security. It is an approach that can be used to encourage Universal Healthcare while allowing coverage during the transition to fullest Universal Healthcare coverage.

Insurance Risk 

Insurance works when you can look at risk abstractly and insure probable known risk rather than known book-keeping risk. This is the challenge with insurance covering pre-existing conditions -- the possibility of a disease is not proportional, knowledge by both parties whether you have the condition today, or in the future. Things ensurers can do to ameliorate the risk is to not cover known conditions, place time restrictions on known conditions, increase premiums, and so on.  The goal of this system is to change the risk equation to share the risks more widely while at the same time moving the population to a more secure coverage model than the month-by-month model generally used.

Health Annuity Bonds

This approach reduces insurance risk through futures contracts for healthcare of individuals. Health Annuity Bonds (HABs)  is not intended to replace a person's need for insurance, but to replace a persons need for insurance in the future.

HABs are an asset you can invest in that provides healthcare. Basic vision: A health annuity bond provides Healthcare for a period in the future of when the bond is secured. E.g. 2022-2047. You can acquire these in numerous ways, and they have a maximum face value (say $2M dollars), and the bond can be traded.

When mature, Health annuity bonds would work as a secondary healthcare coverage behind all other forms of insurance available to the individual. Secondary insurance. If you have any other insurance (e.g. employer, medicare, etc) that gets used first.

If universal healthcare is enacted, then as a last form of payment, less of a HAB would be utilized. To the seller of the HAB, promoting universal healthcare would be a benefit. (See insurance grants).

The company backing the insurance grant remains anonymous except in the case of insurer non-compliance. Insurers who do not pay can be brought forth for legal actions. Otherwise, the insurer is not known to the subscriber.

If other forms of healthcare coverage are available to the individual, then that would cover treatment and services, those would be tapped first. An individual subscriber's savings would not be tapped before an active HAB.

If you, as an insured individual, have multiple contracts active, the active contract with the most future date gets used first. This is to encourage traffic on the secondary market.

Health Bond Initiation Market

HABs would be acquired and distributed in numerous ways to promote fairness, reduced risk, and controlled exposure. The model that appears to work best is the process in a purchase / lottery / auction model.

Purchase - Anyone who wants to assure future Healthcare can buy a new contract. This is clearly a benefit for wealthier individuals, but it could also work for unions, pensions, and other situations where a start date of coverage would be predictable. With a future date over the horizon, the issue of pre-existing conditions is reduced, and this coverage or more is yours until the maturity date or you pass away.

Shared Pool - The charitable portion of this program comes in the shared pool. Money that is collected by:
  • interested parties who want to encourage healthcare coverage would contribute to this pool. 
  • state and local governments can contribute to the general health of persons in their region.
  • the federal government can contribute during the unpredictable periods when they want to help citizen healthcare.
  • legal actions -- such as a product liability case, can contribute portions of settlement for "non-specific damage to the healthcare of people in general".
  • managed endowments.
  • proceeds from direct healthcare.

The pool would be divided in an auction / lottery manner.

In certain situations, sub-pools, weighted pools, and so on can be constructed to allow communities to share resources.

Purchase - A HAB will have an initial cost that worked out by the amortizing service may work out to be about one-third to half of the face value because of the five-year wait, the secondary coverage aspect, and opportunities for the insurer to hedge risk later.

In the purchase, the HAB issuers will put their instrument price and released quantity on the initial market, and buyers receive them in lowest offered price first-in-first out.

Auction - Parties who want the HAB and see its value can bid for coverage. 50% of the money in the shared pool will go towards subsidizing the auction. 50% will go to covering the full cost for the lottery winner. Higher auction bidding will stretch the number of persons with HAB plans. The lottery provides a means to distribute the complete charitable side of the program.

Lottery - $10 tickets for a chance at 25 years of Healthcare starting 5 years from now, for example. The lottery and the auction can be combined in a $10 sealed bid. Highest bidders win until half the shared pool is gone, then lucky winners get the remainder of the shared pool.

HAB Accumulation Auction Fund -- a user account could be an option where a person can invest money in a secure investment account (like an IRA or 529 account). When there's enough money in the account to win an auction slot, then the new HAB would be issued.

Standard Model Usage

In the standard model, a user would hold onto a HAB until it is activated, and then, that person would have healthcare coverage for the standard period of the HAB for 25 years. During that time, the subscriber would acquire a new HAB for a following time period.

Health Bond Secondary Market

If you pass away before the most active contract is up, that one is done. The insurer no longer needs to fund claims on that account. However, if you own multiple contracts, some contracts can be sold through another lottery / auction market, the secondary market.

To buy on the secondary market, you need to already have a future contract (which may not be in force yet) to buy the remainder of another. The proceeds of this sale are split 50/50 between the insurer and the insured. The subscriber is required to have longer coverage than this sold HAB, so the coverage period would not lapse; the insurer's exposure is reduced by the amount of the sale; and the seller receives money which can be directed to a new future contract.

If you are a heavy user, the insurer is encouraged to replace your grant with an equal or better grant on the secondary exchange. Since they all function equally, it will not affect you as a consumer. If you choose to sell this grant on the secondary market, you may then receive some financial benefit. (See insurance grants)

People can choose to own more than one HAB. If you own several health annuity bonds, you can buy and sell to the secondary market provided you don't create a lapse in coverage for yourself. Reasons why people may have more than one HAB:
  • Gift, will, trust, legal settlement
  • Lottery, bonus, or marketing promotional campaign.
  • Buyer anticipates legal expenses that will need back-filling beyond the limit.
  • exceed the coverage cap
  • Purchasing on the secondary market to back-fill the 5-year waiting period. The HAB secondary market does not have the time horizon of the Initiation Market meaning that if you own a future Health Annuity Bond, you can back-fill on the Secondary Market.
  • Organization genuinely supports healthcare expansion and wishes to be involved
  • Insurance company wishes to defray costs by buying a plan on your behalf (Insurance Grants)

HAB Grants

When an insurer has a customer in active force, they may choose to purchase an additional insurance bond for the customer to spread risk. Being purchased from either the initial or secondary market, the insurer would not know which company would be holding the insured risk. If they buy you an active grant with a later expiration date, that new grant would be charged first, and their exposure would be reduced.

Note on Example Figures

I'm using specific figures like $10, 5 years, 25 years, half, etc. for convenience. They seem about right but are likely to be different. Here's the guidelines I'm using.

$10 - For the lottery fee, I'm thinking a reasonable level that would make a nice gift to a third-person, low enough that it can be afforded as a weekly expense, and high enough whenever one million tickets are sold, there's enough money to work the auction lottery.

5 years - The wait period is a time period long enough that forward planning is important and long enough that pre-existing conditions would have worked through resolution. It's also long enough that the insurer can lock into financial instruments to minimize their out-of-pocket costs.

25 years - The duration of the contract is long enough that it would include a "whole-life" aspect in actuarial work. As the market becomes mature, the period may extend longer.

50/50 splits - in areas such as the sale on the secondary market and split between lottery and auction, an equal 50/50 split is defined. The intent it to maximize the value of the action for both outcomes.

Direct Healthcare

Of course, our market can invest in Healthcare centers where we can charge at the prevailing rates. As a non-profit, we then use our earnings to fund the pools and the expansion of more health centers.

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